Even decades after paper money has replaced the gold standard, this precious metal remains a sought after commodity and trading option. So why is gold such a valuable resource? Aside from the fact that it is difficult to mine, it is also beautiful mineral. As long as people are willing to buy it, there will always be a market for it.
Moreover, the economy has become dependent on abstract value and liquid assets like stocks and mutual funds. Because of this, it is considered wise for investors to still look to material assets such as gold, because they can serve as a ‘safety net’ when an economic crisis hits. Regardless of how the stock market performs, gold will always be gold, and its value will hardly be affected.
With that in mind, here’s how to start buying and trading gold.
Learn about the types of gold
You need to have knowledge about the types of gold you could sell. You can check FinanceClap’s previous post on this exact topic where we tackled the differences between gold bullion, scrap gold, and gold coins. All of these have different purity levels and prices. Knowing these specifications can help you when buying and selling, thus giving you an advantage especially when dealing with picky buyers. If you know what your gold is worth, you can avoid making bad decisions down the line.
Know the pros and cons of trading gold assets
You can trade gold jewellery, physical gold, gold certificates, gold exchange-traded funds (ETFs), and a lot of other forms of gold assets. Most people are familiar with jewellery, but while they are easy to acquire and sell, their resale value usually falls after the purchase. The value of each piece also depends on its purity (24k is pure gold, but most physical gold are 18-, 14-, or 10-karat). On the other hand, physical gold will be easier to trade as they reflect their own market value. As for the non-physical forms, you may need to do more research on trading stocks.
Master the tools of the trade
As with any other commodity, investing in gold relies heavily on timing the market right. There are many ways to make informed decisions when trading gold, and one of them is through candlestick chart analysis. At the moment, the charts seem to be in the trader’s favor, as FXCM indicates that there is an upward trend that is likely to continue. Other tools that you can use are relative strength index (RSI) and Stochastic indicators, which basically show how the gold market was affected by recent price changes; and trend analysis, which is used to check price fluctuations in a specific period of time. Leveraging these tools will not only improve your chances of making a good trade. They can also make you more confident and level-headed as a trader.
For more lessons that can aid you in your gold trading journey, you can follow the FinanceClap blog. Our website is a goldmine of expert trading tips and the latest financial news.
Raj Kumar is a qualified business/finance writer expert in investment, debt, credit cards, Passive income, financial updates. He advises in his blog finance clap.